Expensive, Not Inconvenient: Control Alcohol-Related Harms With Higher Alcohol Taxes

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At the risk of blowing up the united front on alcohol reform between pro-consumer liberals and libertarians, I think people need to treat alcohol-related public health harms as a gravely serious public health issue.

The anti-monopoly side, myself included, is guilty of being way too glib about this, and my excuse is that beating the pro-monopoly side will require a message as clear and unambiguous as their “no changes” message. Determination always beats wishy-washy in a political fight such as this, with diffuse benefits and concentrated costs.

Unfortunately, Democratic elected officials have behaved incredibly irresponsibly during this fight, complaining about public health harms out one side of the mouth, and higher booze prices out the other.

The degree of bad faith required to make this argument is shocking, as higher booze prices reduce alcohol-related harms. You can complain about one or the other, but not both.

The ideal position from the Democratic Party would be that, to get a bloc of Democratic votes for alcohol reform, the bill must:

1. Raise the crazy low beer gallonage tax from $1.78 to at least $3.00

2. At the least, maintain the same price level for wine and spirits, and ideally raise it a bit.

3. Establish a statewide minimum price for beer, wine and liquor

4. Require every alcohol seller to scan photo IDs

5. Establish a Do Not Serve list for people convicted of multiple crimes under the influence

6. Increase enforcement and penalties for drunk driving

Unfortunately the Democratic Party has not taken any of these positions, and would likely demagogue them if they were proposed as part of the bill.

But regardless of whether the retail alcohol market is liberalized, these are all positions that every politician claiming to be a champion of public health should heartily support.

As Dylan Matthews showed a few days ago, high alcohol taxes are a very effective way to reduce public harms and crime. It is quite possible for Pennsylvania to have a retail alcohol market where it is very convenient for responsible adults to buy what they please, but where heavy drinkers pay a higher share of the state taxes. This is the obvious Democratic position, since Democrats object to public service cuts and want to retain defined-benefit pensions for public employees. Here is an opportunity to reduce the Corrections and courts budgets, while raising revenue for useful public services:

As criminologist Mark Kleiman told me last month, “Any sentence about drug policy that doesn’t end with ‘raise alcohol taxes’ is an incoherent sentence.” He’s hardly the only one with that view. Economics, criminology and public health literature are rife with studies finding that raising the price of alcohol reduces violence, not to mention other causes of injury and death. Indeed, every self-reported survey of incarcerated criminals suggests that 36.8 percent of state-level violent offenders, and 20.8 percent of federal violent offenders, were drinking when they committed the crime for which they’re incarcerated.

Economist Sara Markowitz, for example, found in a study of U.S. crime patterns that a “single percent increase in the beer tax decreases the probability of assault by 0.45 percent” and “a 1 percent decrease in the number of outlets that sell alcohol decreases the probability of rape by 1.75 percent.” Researchers in Finland found that a 2004 cut in the country’s alcohol tax caused a sudden 17 percent spike in fatalities relative to the previous year. There’s preliminary evidence that alcohol taxes can reduce the number of U.S. female homicide victims. Kleiman cites findings of Duke’s Philip Cook to the effect that a doubling of the federal excise tax on alcohol would reduce homicide and automobile fatalities by 7 percent each, for a net 3,000 lives saved. What’s more, it would only cost twice-a-day drinkers (who, as it is, drink considerably more than average) $6 a month.

One common doubt surrounding this method of reducing violent crime is whether or not alcoholics really care what the price of alcohol is. If they don’t, then raising the price would just cost them money without much social benefit. But the data suggests that alcohol consumers are, in fact, sensitive to the price of the product. Researchers at the CDC compiled a number of studies estimating “price elasticities” of different kinds of alcohol.

The elasticity (as Stringer Bell explains above) is the amount by which consumption changes when the price of a good changes. For example, if the elasticity is -0.5, then a 10 percent increase in price will reduce consumption by 5 percent. If the elasticity is 0 or positive, then consumers are either indifferent to the cost of the product or actually want it more because it’s more expensive.

A few studies found that the elasticity of spirits is positive, perhaps because expensive Scotch or bourbon are Veblen goods: people buy them more when they’re more expensive because their expense makes them better status markers. But generally, the elasticities are negative. Raising the price of alcohol, for example by raising the tax on it, is an effective way to reduce consumption, and thus alcohol-related fatalities and assaults:

Researchers Alexander Wagenaar, Amy Tobler and Kelli Komro also conducted a literature review on alcohol tax and price policies, scanning through 50 studies on the subject. Their conclusion: “Our results suggest that doubling the alcohol tax would reduce alcohol-related mortality by an average of 35%, traffic crash deaths by 11%, sexually transmitted disease by 6%, violence by 2%, and crime by 1.4%.” The case for making higher alcohol prices a part of our approach to reducing violent crime, then, is pretty strong.

 

This entry was posted in Miscellany.

4 Responses to Expensive, Not Inconvenient: Control Alcohol-Related Harms With Higher Alcohol Taxes

  1. Ed H. says:

    http://keystoneresearch.org/media-center/press-releases/wine-and-spirits-privatization-will-increase-alcohol-related-traffic-fat

    I realize that you’ll say that the tax end of this will make my pint moot, but you can institute all of your proposals into a modernization bill instead of privatization, but the better trained public sector workers will still be a bigger deterrent over selling to kids or others who are problem drinkers than a private company looking for profits from the sale of alcohol. Never mind that there still isn’t a politically palatable way for the legislature to raise taxes on booze to make up the shortfalls of privatizing. Besides, libertarians are going to say that blocking the sale of booze to even problem drinkers is not going to be on their agenda, because they generally take the view that if you want to drink yourself to death, have at it; but if you drink and harm others, then you go to jail.

    A modenization bill can open up more PLCB stores near shopping centers, extend hours and Sunday sales, and keep the revenues and good paying jobs in our economy.

  2. Jon says:

    Love the KRC people but that report was pretty silly. Do they think that people are drinking at the liquor store and driving home? I don’t see why else VMT should be incorporated. It’s not like the reform bill will increase the number of poured alcohol establishments (unfortunately.)

    I think the Republicans would accept the demands I outlined if that was the price for a bloc of urban and suburban Democratic votes. I believe they’d rather negotiate with some Democrats than the fundamentalist set that’s against Sunday sales and all the rest.

    We can prevent sales to kids by requiring all alcohol sellers to scan IDs.

    • Ed H. says:

      I’ll go with the stats over the assumptions. When the balance sheet is looked at, the pros of keeping PLCB in state hands outweighed privatization in almost every aspect. And with an economy in recession, we need better paying jobs with emerita, like the PLCB stores offer employees, and the revenues that have never been made up by any other state in the country by privatizing.

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